DEVELOPING THE MODEL OF BRAND EXTENSION:Limitations, Multi-brand portfolio, The question of portfolio size

<< POSITIONING – THE BASE OF EXTENSION:Extending your target market, Consistency with brand vision

BRAND PORTFOLIO:Segment variance, Constraints, Developing the model – multi-brand portfolio >>

Brand Management (MKT624)

Lesson 25

DEVELOPING THE MODEL OF BRAND EXTENSION

Introduction

The discussion on strategic deliberations about what not to do continues from the previous

lecture as point 4. That explains most of the fundamentals that we take into consideration for

extensions. With that we move on to developing a model for brand extension.

Given the limitations of extensions, which you will learn in this lecture, the discussion will

move on to the need for multi-brands. Multi-brands basically stem from limitations of

extensions. Not all needs can be addressed by one brand and its extensions; multi-brands serve

the multi-purpose needs within a segment. This lecture also discusses how multi-brands come

into being and what should be the basis of deciding number of different brands within a

portfolio. But, before that let us get back to the topic of deliberations and connect it with the

previous lecture.

4. Expertise and know-how transferability

The brand must be believable in the new field. Customers should feel comfortable

with the level of know-how the company is known for1. Sony can be trusted to

undertake any electronics project, whereas a company in foods or fertilizers may not

be believed to undertake such a venture. You may not do it unless you have the

expertise and are perceived in the market for having the know-how to transfer to the

new field.

5. Perceived difficulty of manufacture

Consumers have a perception of how difficult or not difficult the manufacturing

process is relating an extension. If perceived difficult a strong brand will benefit. If

it is perceived not so difficult, a strong brand may not have that big an advantage2.

You may not get into extension unless your existing brand is very strong and

manufacturing of the new process is perceived difficult. Customers in that situation

give complements by saying that only a reputable company with strong expertise

could undertake such a challenging introduction.

6. The factor of "complementarity" or "fit"

This means how comfortable the new product with the old one is. If there are

emotional associations that run across same kind of customers, the effort may be

more fruitful3. An accurate example could be a fashion clothing company getting

into perfumes. Fashion clothing and perfumes have a lot of commonalities and

associations among the target market. In the absence of such a fit, you may consider

extendibility with apprehension.

The conclusion from all the factors that we have discussed is that extensions should strengthen

the brand and not weaken it. Incoherent and illogical extensions have the potential to diminish

brand's value.

Any company that may want to extend its brand must know where its brand stands vis-à-vis

competition. It is the vision and the image parts coupled with the identification of customer

needs (customer model) that help a company pinpoint when and where to extend. It is this

strategic process that helps the company find the fit between the vision and the extension.

Brand Management (MKT624)

DEVELOPING THE MODEL

With the understanding of the two well explained concepts of extensions along with the

fundamentals that lay the ground for extensions, we are now all set to developing a model for

brand extension4.

1. Explore opportunity areas

This reflects looking into areas of unmet or not-well-met needs. You must identify the

reasons why are there gaps in the market? Do the gaps exist due to distribution difficulties

inherent in the product character? Or, most of the players have not had the requisite

technology. Or, they have been plagued by shortage/absence of the quality human

resource. If the company is able to address the unmet needs by outsmarting limitations of

competitors, then it can assume the role of a leader in the segment.

2. Generate brand-based product ideas and analysis

This step should not offer any difficulty in handling it, for you have identified the area of

opportunity. You must come up with a few ideas that have a fit with the situation and

your brand vision. Go through a process of screening, analyze the situation and select the

best one in light of the consumer needs.

A well-crafted concept must explain the features, attributes, and benefits of the product

and how is it envisioned to be different from the existing one and from the competition!

That will also address the positioning that you envisage for the product and the

purchasers. You will also know to what extent the new entry will enhance the value of the

brand.

3. Develop a brand extension strategy

It defines the role the brand extension is going to play toward filling the financial growth

gap in terms of revenues and other financial goals. It also explains the strategic marketing

role the extension is going to play and hence how it will strengthen the overall brand's

strength - the market share and position in the market.

You explain the new product in all its forms including packaging, its reason for being,

and the need it is going to satisfy. You must be very careful in deciding whether to go

upwards or downwards in price, for both have their implications.

You must take into account the differentiation factor in terms of distribution, if any.

Explain the extensive role extension is going to play.

Limitations

Despite all the favorable factors for extensions, the concept has limitations. Not all the time

extensions can fill all the gaps in the markets. In the words of a marketing expert, "there is a

tremendous opportunity cost that we pay by going through extensions; by not creating a new

brand; unfortunately, that cost is unquantifiable". By getting into the extension it was a strong

brand that was not created, says the author5.

Multi-brand portfolio

In other words, this expert calls for introduction of new brands whenever the company has the

right rationale to go for them. It is risky, more expensive, requires more time and energy, but

most certainly offers a strong and a bright future to the company.

The new brand can offer better coverage of the market and penetrate new, young, and emerging

markets that could bring meaningful growth to the company.

Brand Management (MKT624)

The question of portfolio size

This author also goes on to say that we should not get into a large portfolio of brands by being

too ambitious about brands' power and value6. He advocates having a few brands within a

portfolio for promotions to gain a significant market share.

Marketing people always are addressing the question of how many brands should there be in a

portfolio. There is no hard and fast rule to that. What is important to understand first is how

does a company own so many different brands?

Owing to growth

During periods of growth, companies like to introduce new brands each time they get into

new segments and distribution channels. This is done to multiply the effect of existing

and added channels and to make sure that there is no conflict between the new and the old

channels and the new and the old segments. They like to keep the conflict of interest

away. The concept of having two different brands in two different value pyramids applies

here. If you go back to the example of Toyota and Lexus, the concept becomes clear.

Owing to acquisitions

Another reason for the growth of portfolios has been acquisitions and mergers, which

brought more and more brands to companies a discussion, that took place earlier in

relation to company's strategy to acquire strong brands. Although it was on purpose (an

assortment of powerful brands in markets across geographic boundaries), it did present

the senior marketing and other managers with a challenge they now have to face.

Need to have a small portfolio

Bringing all the brands into public limelight is difficult, for that can come only through

meaningful communication, which is expensive. Generally, the need is to manage a

portfolio with a few brands, which is manageable in line with a company's resources.

With competition increasing, there is a dire need to achieve productivity gains and cost

efficiencies. You cannot do that with a big portfolio.

Production and research facilities are being regrouped to save costs (pharmaceuticals in

particular). It is the same factories producing different brands with features different. But,

there should be a limit to variations coming from the same factories.

With brands becoming international and having international appeal, they are no longer

meant for certain territories within national borders. This leads one to believe that one

should be having a few in a portfolio thus making it manageable. The investment required

for a large international presence is massive to handle a large portfolio, and, hence, a

smaller one.

The question of how many brands should be retained in a portfolio is to be answered by

looking carefully into the strategic roles assigned to and played by different brands. This

implies that it must be linked to an analysis of the brands' functions in their respective

markets.

Brand Management (MKT624)

Bibliography:

1. Geoffrey Randall: "Branding A Practical Guide to Planning Your Strategy";

Kogan Page (60)

2. Geoffrey Randall: "Branding A Practical Guide to Planning Your Strategy";

Kogan Page (60)

3. Geoffrey Randall: "Branding A Practical Guide to Planning Your Strategy";

Kogan Page (61)

4. Scot M. Davis: "Brand asset Management Driving Profitable Growth through

Your Brands"; Jossey-Bass, a Wiley imprint (143-148)

5. Jean-Noel Kapferer: "Strategic Brand Management Creating and Sustaining

Brand Equity Long Term"; Kogan Page (274)

6. Jean-Noel Kapferer: "Strategic Brand Management Creating and Sustaining

Brand Equity Long Term"; Kogan Page (275)

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